Following increased infighting between the Liberals of the FDP and the SPD/Greens, the German traffic-light coalition has finally come to an early end, less than a year before the next scheduled election, on the same day as Donald Trump was announced as the next United States president, said Societe Generale.

The reasons for this break-up, linked to the direction of economic policies and funding, have been building for some time but the split is also due to the FDP's loss of voter support, wrote the bank in a note to clients.

A vote of no-confidence is expected in mid-January, with new parliamentary elections then likely to be held in March, stated SocGen. The center-right CDU/CSU will most probably win those elections but be forced to include the center-left SPD in a new coalition to gain a majority.

This in turn would require them to agree and finance pressing matters such as short-term stimulus, Ukraine, defense and a structural transformation of the German economy, according to the bank.

Notwithstanding already large policy differences on issues, such as taxation, climate change, immigration and social policies, this will be additionally challenging as long as the debt-brake rule is not reformed -- for which a two-thirds majority is needed in parliament.

Assuming new elections are held in March, a new government could take office in Q2 2025 at the earliest, suggesting that Europe could lack a majority government in Berlin for the coming six months, during which time President-elect Trump's new policies towards Europe -- tariffs and Ukraine -- may be formulated, added SocGen.